5 Traps to Look Out For With Car Dealership Finance

Car dealership finance officer sitting at her desk

Dealership finance might be convenient but it pays to make sure your loan won’t come with a sting in the tail

When purchasing a new car people can often be bustled into the office and offered dealership finance options on the spot. It’s appealing to sign your name on the dotted line and leave the dealership with the keys in your hand, but do you really know what you are signing up for?

Here are some of the tricks they may try with you when you take the dealership finance option.

1. Giving you a verbal quote — only on the interest rate

The dealer will be able to hide the true cost of your loan behind a competitive interest rate. This can often convince you to rule out your alternatives before you’ve properly considered them. To do your homework on a dealership finance offer and compare it to the other options on the market you need to get a detailed quote from them, in writing, that outlines the fees, loan term, interest rate, repayments and the end-term balloon (if applicable).

2. Building a buffer into your car price

You might think you have negotiated a great deal for your car purchase, however, if the dealer offers you finance that seems too good to be true you should ask yourself: “Where is the dealer making their money in this transaction?” Often the dealer can offer highly competitive finance options if they’ve achieved a good profit margin on the car sale, or under-valued your trade-in. If you suspect this is the case you should speak to a buyer’s agent.

3. Giving you a longer loan term

Most borrowers have a keen eye for spotting a high interest rate, or a hefty loan repayment, but a six or seven year loan term might slip under your radar. By stretching the loan term by an extra year or two the lender will be able you offer you a lower repayment amount. Don’t be fooled by this, add up all the fees and repayments you will pay over the life of your loan and let this figure guide your decision.

4. Adding the application fees into your loan amount

The dealer might quote you a loan with no upfront costs. This is a good sales tactic, particularly for buyers who have a smaller deposit to contribute. If this has been offered to you, make sure that the upfront fees haven’t been financed in your loan amount. This could end up costing you in the long-run.

5. Look out for ‘balloon’ payments

Similarly to longer loan terms, structuring a balloon payment into the end of your loan will make your ongoing repayment amount cheaper. This will make your finance option seem more appealing on face value, but you need to ask yourself: “Will I be able to afford the lump sum payment at the end of my loan?” If you can’t then the financier may let you extend your loan — however this might mean facing a higher interest rate.

At the end of the day if you want an affordable and transparent finance option for your new car the key is comparison. Do your research online or speak to a broker, and remember— if the offer seems too good to be true it probably is.

Learn more about the author – Don Farquharson.

What Our Clients Think …

Hi Don, Ben & team, I can’t thank you enough for assisting me so quickly with my loan query. It takes the pressure off to know that you are only an email/phone call away with no less than an immediate response. Thank you again.

Don and his team were fantastic. The information and options offered were extremely helpful and they kept me informed all the way through the process. I highly recommend All About Loans.

Don and his team have always been very helpful over the many years of acquiring loans. Good service and friendly team.

What we appreciated most about working with Don and his team was their ability to cut through the predictable delays related to paperwork, keep everyone happy, and deliver the expected results. Don has exceptional professional qualities. He provides up to date financial information.


Absolutely outstanding service. Don was able to get my loan sorted without the usual hassle that I have faced previously and I was able to get into my home sooner than expected and get my renovations sorted quickly.

I didn’t hesitate to contact them again when I needed to refinance after my marriage breakdown. The service I have received from both Don and Jason was fantastic and I will definitely use them again in the future and recommend their services to others.

Don helped not only with getting a great rate for our finance, but was also a great guide and someone we felt comfortable asking questions about the whole home buying process. He went above and beyond!

Excellent service with honest feedback. I will never go straight to the bank again. It’s nice to know you have someone on your side, particularly when things get hairy. I could not recommend their services highly enough.

Don provides a friendly and knowledgeable service based off his experiences as a lender in a bank. Don knows the industry inside out and knows where to go to get the best deal for his clients. Don is easy to work with.

We have dealt with Don and his team for several years now and we have only the highest regard for the professionalism and genuine customer focus that they provide. We have no hesitation in recommending his services.

Our Lenders

Meet our wide panel of
competitive lenders.

Request a fitting